Commentary on Radio & Audio

May 2011

May 27, 2011

Radio is at odds with the music industry. The moment the labels started raising the issue of royalties and trying to get radio to pay the artists, we made them the enemy -- at least, on the business side of the building. Of course, making the music industry the enemy is like making jelly the enemy of peanut butter. They are meant to be together. Radio and music are a perfect fit.Dan Mason's recent memo about CBS returning to a policy of back-selling music and identifying titles and artists more often reminds me of a confidential discussion I had about a year ago. I was convinced that I could help make some progress on the artist licensing issue, so I took it upon myself to make some phone calls. The NAB was not aware I was doing this, nor did I represent in these calls that I was representing the industry as a whole. My goal was to create a dialogue with the music industry, knowing that sometimes things can be resolved by making sure we're listening to the issues.

My calls were embraced by some at the highest levels of the music food chain, and I asked what it would take to get this issue resolved. What I learned is that the music licensing issue was being driven by a deep hatred for radio that had been building up for almost two decades, dating back to when radio decided we no longer needed to back-sell records and began to research everything to death and take few risks on new releases.

Though I was able to get a high-level executive to admit that changing these policies might make the labels feel radio is a partner again, rather than an adversary, it became evident that the vitriol toward radio was so deep, the anger running so hot, that these guys were going to take every action they could to get revenge.

At our Convergence conference I spent a fair amount of time with Tim Sanders, author of Today We Are Rich, the essence of which is that success comes by giving. Tim and I revisited this last night in Austin, and he told me a story about how he was bullied as a kid and his grandmother told him the way to solve the problem was not by bullying back or avoiding the bullies, but by reaching out and giving them what they needed. She explained to him that they were probably bullies because of situations at home, perhaps an abusive father, a divided family, or some tragedy that was causing them to act out. She recommend that Tim approach them, compliment them, look for ways to let them talk, get to know them, and find ways to be giving. He turned adversaries into friends by having a giving attitude.

Mason's memo about doing more back-selling of artists and songs gave me an idea. If we want to resolve the music licensing issue, rather than battling the labels and being at odds, why not give them something they are not expecting? Why not give them the opposite of what they have been frustrated over for 20 years? Maybe if they see that we have become the partner they hope for, they will meet our giving gesture with appreciation -- though anything we do should be because it's the right thing to do, not because we expect something in return.

Our natural instinct is to meet every threat with an equal or larger threat and end up in battle. But at the root of these battles is a need to be met, something that can often be accomplished (within reason). I've been told by music executives that they would love it if radio returned to giving the names and titles for music and breaking a few more new songs. That alone could not be used as leverage to resolve our performance royalty issues. Why not do it anyway? Not to soften up the opposition, but because it will help their industry and won't hurt us to do it. In the end, our listeners will benefit the most. Maybe once the labels see radio cooperation again, they'll rethink their vitriol.

As a former radio programmer, I believe we have become so sanitized and so overly sensitive about testing music that we miss those magic moments when a song that was added on gut turns out to be a giant hit. Some songs never show strong in initial music testing, but our audiences grow to love them.

Why not take an an unexpected but welcome approach.? Tim Sanders said last night, "If you want to grow your business, love your advertisers to death. Love them by giving of your time and resources without expecting anything in return. Love them by inventing products that they love. Love them by doing the unexpected. You'll see an average of 10 times return when you give rather than take."

I can't help but think that more of that attitude in our industry would make us stronger with our customers, our employees, and even the recording industry.

May 24, 2011

We all watched in shock as the tornado ripped across yet another American city. A couple of weeks ago it was Tuscaloosa, and this week Joplin. When the last storm hit, one radio station employee lost his home, and Radio Ink asked you to step up to the plate to help this family in their transition. They lost everything and had to go out and buy clothes, food, and other necessities. Thanks to your generosity, Radio Ink raised thousands of dollars.

This week several employees of Zimmer Radio Group in Joplin have lost their homes. These radio brothers and sisters need your help. Though we could all donate to the RED CROSS (and we should), Radio Ink has created a disaster fund to help these radio folks who've lost their homes.

It could have been me or you. If each of the 40,000 or so readers of this magazine would donate even $5, we can build a fund to help these five families, and possibly others. One hundred percent of your donations will be used for this purpose.

May 20, 2011

I'm here to report that the sky is not falling. After three intensive days with the world's leading experts on digital media and advertising, I'm here to report that all is well in radio. Like a burning beam of argon focused on a single point of steel, these experts, employed in the single task of pondering radio's present and future, have concluded that radio is not dying.

You knew it all along.

When great minds are gathered in a room and asked to create a singular focus, the outcome is usually one of great gloom or real optimism -- and few, if any, at this week's Radio Ink Convergence felt radio's sky is falling. That sense of optimism came even from those who would benefit from radio's demise, or who would benefit from having us believe our future is dim.

You knew it all along.

But maybe a slight seed of doubt had entered your frontal cortex and begun to slowly grow as you wondered if, by chance, radio IS dying. Game face on, you've projected the belief that the threats of our demise were unfounded. But deep inside, the seed remained. "Maybe there is something to this.... but who has time to be concerned with these things?"

A car runs a light and is heading straight for you at 60 miles per hour. You believe for a split second that it isn't really happening. You utter a micro-second prayer, hoping to survive. When the car misses you by a fraction of an inch, you exhale with relief, eyes closed, grateful your prayers were answered this time. You vow to change. But your confidence soon returns, and nothing changes -- until the next time you're given a second chance.

Radio's second chance is before you at this moment. Experts predict radio's future with optimism, but they also believe you stand at a crossroads. Turn to the left, and face rocks, climbs, deep wading, and uncertainty. Turn to the right, and there's a straight, clear path ahead with the status quo.

Those who are building alternative radio platforms and who hope to take it all away from you are counting on you to turn to the right. They are counting on your raw confidence and your steadfast belief in our current way of radio life, on your believing that the status quo is the right way and that things will somehow work out. Will radio cling to its past? Or will radio be willing to take the road less followed, where self-initiated challenges lie?

I'm reinvigorated.

I believe more than ever that radio has a bright future and that it is in a solid, secure position to achieve incredibly lucrative new heights. But I'm also more convinced than ever that radio's sole mission at this moment is to become entwined with digital media platforms like two twisted strands of DNA.

It's not possible to articulate the depth of data that drew me to this conclusion. Our visiting radio siblings entered the conference like dry land and left saturated like the Mississippi Delta after the levy was blown. They don't know what hit them, they cannot articulate everything they have learned, the rush of data has flooded their brains, but they return to their posts empowered to make changes be based on newly acquired instincts. And they are convinced, beyond doubt, that action is what will keep the sky from falling and that inaction, the status quo, is what will make it fall. They know the choice they must make.

Our future can be bright. But, as one speaker commented, "This generation of radio managers will need to die off before true change can occur in radio. They are too deeply entrenched in their ways of thinking to move to the same level as those in the new world of media, and by then it will be too late."

Don't let it happen. Our sky won't fall if we take that left turn now, if we shift our thinking and become an integrated digital-radio industry. Advertisers don't just think this digital media thing is cool, they are walking away from any media that cannot offer deep digital integration. It's undeniable.

Like you, I'd rather cling to the ways I know. It's easier -- for a while. But the approaching freight train's horn is blasting as it's trying to get you off the track. I guarantee that's clear to the majority of people who attended this conference. Though some entered determined to prove these theories wrong and left with the same attitude, most are determined to start down that road less followed.

Which road will you choose?

PS: There are no words to describe the Convergence experience this year -- our best yet, I believe. I do want to express thanks to the many speakers and to the sold-out room of people who took time away from their busy lives to open their minds to new possibilities. You are the true rebels, misfits, and revolutionaries. Thank you.

Also thank you to the following sponsors who paved the way to make this conference possible. Please support them. They believe in radio and the possibilities that lie before us.

May 10, 2011

Why would a company like Clear Channel invest $60 million in Ryan Seacrest if jukeboxes or playlist services were all listeners wanted? Of all companies, Clear Channel would be the first to turn its radio stations into playlist services to save money if it could. But Clear Channel and other radio broadcasters invest hundreds of millions in local and national radio personalities because entertainers engage listeners and hold them longer, increasing ratings and ad revenues.

Radio has strong brand and personality loyalty, tremendous targeted audiences, and huge promotional power. Radio can turn on a dime to respond to the needs of tornado victims and can relate to a community based on the buzz of the moment. Radio's content is dynamic, whether it's raising money for a local cancer victim or playing a rainy-day tune to go with the storms.

And radio has a personal bond with its listeners: In a recent Arbitron survey, 79 percent of listeners said they'd be very or somewhat disappointed if their favorite radio station were no longer on the air. Radio is also curated by experienced professionals and extensive research so the music played is what the target audience most wants to hear. That is the magic of radio.

Enter Pandora Radio. As wonderful as it is, it's not radio. It's a playlist service.

Stations that try to be playlists probably can't do it as well as Pandora. But what Pandora cannot do, at least not now, is be local and relevant. What radio does best, and has always done best, is entertain, with real people and real personalities.

Don't get me wrong. Pandora is a phenomenal success. Its recent IPO filing is expected to raise up to $100 million and will be one of the most successful IPOs this year. It's hot and popular among investors who believe Pandora, with 80 million registered users, can take a high percentage of radio's approximately $17 billion in revenue. But if investors are considering Pandora on that basis, they should perhaps look at the statistics

In its IPO filing, Pandora claims to have more than 50 percent of all Internet radio listening. Not too shabby. But only 3 percent of all radio listening in the United States takes place in digital form. The rest, 97 percent, is still over the air. And most of the Internet radio listening Pandora doesn't get is terrestrial radio streaming.

Pandora claims to have streamed more than 3.9 billion hours of programming to its registered users. Seems like a big number, until you realize that annual U.S. radio listening is an estimated 179 billion hours. If Pandora had four times the registered users (320 million, more than the entire U.S. population) , it would be doing 15.6 billion hours, or less than 10 percent of all radio listening.

Pandora has impressive revenue numbers: $90 million in fiscal 2010, up from $50 million in 2009. But the two top-billing terrestrial stations between them exceeded $111 million -- Hubbard-Bonneville's WTOP/Washington at $57 million and Clear Channels KIIS-FM/Los Angeles at $54 million). And they did that with probably a fraction of Pandora's listening hours.

Additionally, 60 percent of Pandora's revenues go to music licensing fees, which grow as listening grows. In contrast, radio is paying no performance royalty, and current negotiations would put a royalty at about 1 percent of revenues. Furthermore, WTOP and KIIS are probably throwing off 40 percent-50 percent margins after all expenses.

To launch an Internet-only playlist service and have it generate gross revenues approaching the two top-billing radio stations in the United States is impressive. But the prospect of Pandora's stealing a significant chunk of radio's $17 billion market may be an exaggeration.

I love Pandora Radio and find it an interesting phenomenon, but will it kill radio? Only time will tell. But, despite its name, Pandora is not radio, and it can't do what radio can do.